Thread: McGinn interview - worth a read
The InternetWeek Interview -- Richard McGinn, CEO, Lucent Technologies
These days, Lucent Technologies CEO Richard McGinn is like a rich kid in the candy store. Able to spend billions in pooling transactions-rather than through purchase accounting-as of October 1, the spin-off of AT&T is determined to acquire whatever company it needs to become the top multimedia-equipment supplier to service providers and corporate customers. Lucent already has spent substantial sums to acquire ATM access players Yurie Systems Inc. and Agile Networks.
McGinn told Saroja Girishankar, InternetWeek executive industry editor, that his acquisition strategy is being supplemented by internal developments from a faster and savvier Bell Labs. On the product side, look for Lucent to make waves in the semiconductor, network and systems-management areas, as well as in software for better call control, IP and ATM management.
InternetWeek: Lucent had its second anniversary as an independent company last month. What have been some of the high points for you and the company?
McGinn: Last year we increased our share in different technological and market segments [through acquisitions] and introduced new products with needed service and support. This allows us to better articulate a vision of how networks are converging for both enterprise and service-provider customers.
InternetWeek: How will you shed Lucent's image as a vendor of telecommunications equipment and convince customers that you can actually deliver voice, data and even video over a single network?
McGinn: We are much more than that. We provide semiconductor products to computer and communications vendors. Then, we have messaging, call centers and PABX with network management for enterprises. We offer optical, wireless, data and ATM access network products as well. We have been expanding our Netcare network operations centers nationwide to provide network management and remote diagnostics services not only to enterprise customers, but also to service providers. So when I hear, 'Oh, you're not a big player in data networking and software,' I'm not worried at all.
InternetWeek: From Lucent's perspective, how are backbone networks going to evolve?
McGinn: Over time, the distinction between ATM and IP fabrics will blur, and networks will combine the robustness, functionality and throughput of ATM with IP to form what we [internally] call IP version 37. IP and ATM protocols will begin to be weaved together, yet will require little conversion of data to keep the cost down.
We envision a situation where the converged IP-ATM networks will be bolted onto an optical Sonet backbone using separating blades, requiring no conversion and low cost. This means multifunction services to enterprises, many of whom do not wish to own or operate their own networks.
InternetWeek: Where is Lucent going to play then?
McGinn: Sixty-plus percent of our business is with service providers, and we provide engineering design to provisioning of systems software and engineering support to them, whether they be wired, wireless, optical or Sonet networks. The enterprise side is also growing. We have added $10 billion in new sales since we went public.
InternetWeek: Who is your biggest competitor, and how do you differentiate?
McGinn: Cisco is our biggest competitor and the largest routing company in the enterprise space. But the service-provider side is where the growth and action are. Service and support become really important with service providers, and that is what distinguishes us from others.
InternetWeek: How much of your success to date has been influenced by the expansion of the Internet?
McGinn: The Internet has had substantial influence on us and others. Retailers, brokerages and travel-services companies are all going online, and in the future, customers will even pay online.
Correspondingly, for us, we have to provide IP and ATM networks on high-speed optical and Sonet pipes. There is demand for medium and broadband wireless networks. Over time, IP will evolve into something else, but regardless, we will need to provide highly reliable, high-speed networks that, in turn, will enable enterprise customers to conduct business over the Internet. In the future, you will see access to the Internet and real-time voice interaction with agents using our CallCenter network.
InternetWeek: Because you don't have a big share of the backbone IP and ATM network market, does it make sense to acquire a company like Ascend Communications to gain that share?
McGinn: We have already acquired 10 companies, and we'll acquire another handful or more in 1999. As far as Ascend is concerned, we OEM Ascend's technology now and we jointly sell on some things.
InternetWeek: What other technologies do you need to achieve your vision?
McGinn: The ability to deliver firmware on chips as part of the overall systems has become more important. Also, more in the area of software-call control, management and applications.
InternetWeek: Will you get them mostly through acquisitions?
McGinn: We will acquire and we will develop internally as well. We're spending about $4.5 billion this year on R&D, 12 percent of our revenue.
InternetWeek: What challenges does the industry face in building these convergent networks?
McGinn: The industry has to deliver what it's talking about in the same year. There's a lot of vaporware now. Second, we have to get better at delivering real, scalable solutions that work all the time. Carrier-grade quality is not available in many of the Internet-based products, but we have got to make that evolution quickly because customers will demand that quality service.
InternetWeek: What would you have done differently?
McGinn: We had to form a company, get a management team in place, get a name, get a set of books, a logo and do the IPO in a short period. So, we didn't spend the time to focus on a strategy for the business and we lost a year in getting into areas like data networking and software.
InternetWeek: How will you be able to sustain your current growth rate?
McGinn: We have to be quicker to the marketplace with more comprehensive offers of service and support and technology, broaden our base to new high-growth areas, continue to acquire as well as to invest organically and acquire more talented people.
AT A GLANCE
Lucent
CEO and chairman: Richard McGinn
Headquarters: Murray Hill, N.J.
1998 revenue: $30.1 billion
1998 net income: $2.3 billion
Primary lines of business: Central office voice, optical and transmission switches; PBX and voice messaging; LAN and WAN switches and access products; network management and communications software
Source: Lucent Technologies
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